Responsibility system

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Responsibility system (contract responsibility system or household responsibility system) was a practice in the People's Republic of China, first adopted in agriculture in 1981 and later extended to other sectors of the economy, by which local managers are held responsible for the profits and losses of the enterprise. This system partially supplanted the egalitarian distribution method, whereby the state assumed all profits and losses.

In traditional Maoist organization of the rural economy, and that of other collectivised programs, farmers are given a quota of goods to produce. They were compensated for meeting the quota. Going beyond the quota rarely produced a sizeable economic reward. In the early 1980s peasants were given drastically reduced quotas. What food they grew beyond the quota was sold on a free market at unregulated prices. This was an instant success, quickly causing one of the largest increases in standard of living for such a large number of people in such a very small space of time. This system maintained quotas, and thus, the element of socialist societies termed in China, the Iron Rice Bowl (in which food and employment was ensured by the state).

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This article contains material from the Library of Congress Country Studies, which are United States government publications in the public domain. [1]